Scrap and rework: How to cut these costs

Scrap and rework happens

Scrap and rework costs are a manufacturing reality impacting organizations across all industries and product lines. Scrap and rework costs are caused by many things—when the wrong parts are ordered, when engineering changes aren’t effectively communicated or when designs aren’t properly executed on the manufacturing line. No matter why scrap and rework occurs, its impact on an organization is always the same—wasted time and money. And while no one, especially an operations manager, wants to admit it, these expenses add up quickly and negatively impact the bottom line.

Although it is near-impossible to eliminate scrap and rework completely, you can reduce the amount of scrap and rework in your organization by optimizing the way you document product data, review manufacturing processes and communicate manufacturing and engineering changes throughout your supply chain. If priority is given to evaluating and improving your manufacturing processes, it becomes much easier to reduce the amount of scrap and rework in your organization.

Reducing scrap through documentation

Many small to mid-size manufacturers believe their documentation bases are covered if they’re capturing designs in a CAD tool. However, this couldn’t be further from the truth. While CAD drawings are a vital part of documenting product information, they fail to capture complex BOM information, or show changes made to a design once it moves into production, so relying exclusively on CAD drawings increases the odds of error and makes scrap and rework more likely to occur.

In addition to product drawings, it is important that manufacturers create and maintain a bill of materials (BOM) for each product. Because so many business decisions, like part-ordering, can be driven from a BOM, it is crucial that the information contained within a BOM is accurate, and up-to-date. Incorrect BOM information can result in ordering the wrong parts—and if the parts can’t be returned or used in other products, they become scrap for the company.

If you are outsourcing manufacturing activities to a third-party like a contract manufacturer (CM), product documentation becomes even more important. You may need to provide the CM with a manufacturing build package, like a PDX file, which contains product data including CAD drawings, datasheets, work instructions, BOM records and change details. Any and all product data handed over to your CM must be current and correct so he or she can build to spec; failing to do so is a major cause of rework and scrap.

With scrap on the line, focus on manufacturing processes

In addition to documenting product data, manufacturers can help reduce scrap and rework by carefully and consistently monitoring how products are made. Even if it means a trip overseas to walk the CM’s manufacturing floor, understanding your process and how it’s being implemented on the manufacturing line is the best way to find areas for improvement and prevent scrap and rework expenses from creeping up.

When reviewing your manufacturing processes, note the fixtures and jigs that are used to build your products. Are these tools performing as needed? Or are they introducing errors on the manufacturing line? These tools play an important role in the manufacturing process, so don’t overlook them. Damaged, ill-fitting or poorly-made fixtures and jigs are a common cause of scrap in a manufacturing organization, but with proper documentation and evaluation these tools can be optimized to improve product quality and reduce scrap.

While you may be capturing standard operating procedures (SOPs) and work instructions early on, it’s important that team members have quick and easy access to the most up-to-date versions of these documents. When people cannot find the latest SOPs, they often work from outdated versions, which leads to little mistakes, as well as major quality and manufacturing issues that ultimately require rework or result in scrap.

Documentation and managing changes go hand in hand

When your manufacturing processes have been captured, reviewed and approved via a controlled documentation and release process, the risk of scrap and rework is greatly reduced. But to further minimize the risk, manufacturers must also document and optimize the way they manage changes to the manufacturing process.

Because scrap can occur when a change is implemented at the wrong part of the manufacturing process, it is essential that change information is communicated to all key stakeholders—internal employees as well as the manufacturer's supply chain. It’s also important to eliminate lag time between making a change decision and communicating it out to stakeholders, because without advanced notice about upcoming changes, it’s difficult to work together to optimize production. Neglecting to correctly manage this process results in serious waste, yet it’s a mistake many manufacturers continue to make.

Imagine a scenario where a significant engineering change—designed to improve the product—is released without the manufacturing team’s knowledge. Imagine that change was made directly following a major production commitment featuring the old part or process. Now you have two choices—you can finish the commitment as promised and deliver a less competitive product, or you can bite the bullet and aggressively move to add the change to the current release.

In both situations, you are making the most of a bad situation. If you deliver a less competitive product, you may damage your reputation or decrease the odds of repeat business with the customer, but if you do move quickly to accommodate the change, the purchased components pipelined for the production plan will need a top to bottom review.

Inevitably you will be faced with non-cancelable non-returnable (NCMR) components—i.e., scrap. Additionally, any affected custom parts, and most—if not all—of the preparation work done by manufacturing will have to be scrapped. To make matters worse, you may have to pay fees associated with return material authorizations (RMAs). This, along with all the other scrap, takes a huge chunk out of your bottom line.

How paper and electronic change processes compare to cutting scrap

In a market defined by frequent product changes and the growing pressure to innovate, effective change management processes and methods are key to preventing scrap and rework. Although documenting changes is the first step, an equally important part of change management is the effective and ongoing communication of change information.

Some organizations choose to capture and document change information using paper forms. However, there are obvious concerns with this approach. Not only can paper forms get lost on someone’s desk, but manually passing forms from person to person can be a time-consuming task. Plus, determining which paper document is the latest version is tricky—especially when documents have been floating around for awhile, and multiple people are involved.

When you’re trying to prevent scrap and rework, paper forms aren’t enough. Manufacturers should consider electronic change management software to help eliminate rework and scrap expenses. Change management software can provide users with a way to get all stakeholders, internal and external, on the same page. All enabled users can suggest changes electronically, and can be informed automatically when changes are suggested and implemented.

Electronic change software significantly reduces change cycle times, keeps all key stakeholders informed of changes and provides them with an effortless way to signoff or reject a change. All in all, an efficient change management process will help limit rework and prevent expensive scrap errors.

Prevent scrap and rework from costing you

To maintain a competitive edge, small and mid-size manufacturers must constantly find ways to cut costs and improve efficiency. One way companies can save time and money is by preventing scrap and rework. Documenting product data, reviewing manufacturing processes and clearly communicating changes throughout the supply chain all prevent scrap and rework from cutting into a company's bottom line.